The smart money

Fund managers from five leading South African asset managers expect returns from local equities to exceed 10% over the next 12 months, sys a report undertaken by the Sanlam Personal Portfolios Bull and Bear Report.

“Equities continue to remain the preferred asset class as the fund managers expect cash, bonds and property to provide returns of between 5% and 10%,” says Imelda Martin, fund analyst at SP² Advisory Service.

“This is the first time the survey has included property as it is increasingly being seen as a separate asset class and many new funds have recently been launched in this sector.”

The fund managers all remain bullish on financial and industrial shares and are mostly neutral on small and mid cap shares. A minority are bearish about resources and IT shares.

“In the commodities sector two of the fund managers expect the oil price to move below $35 per barrel, while two expect it to reach between $35 and $45 per barrel,” says Martin. “They all predict that gold will remain between $400 and $450 per ounce.”

All the fund managers believe the rand will remain between R6.00 and R7.00 to the US dollar over the next 12 months. Three fund managers expect the rand/euro exchange rate to move between R8.50 and R9.50 while the other two predict a more favourable rate of R7.50 to R8.00 to the euro.

“The fund managers have varying views regarding inflation and interest rates. Two fund managers expect a downward move in inflation and the repo rate. This reflects a change in view from the 2004 fourth quarter survey, in which none predicted this trend,” she says.

One fund manager believes inflation will trend upwards and two expect the repo rate to go up.

She says emerging markets, especially China, Korea and the Far East, and to a lesser extent South Africa, Brazil and Russia, are still favoured above developed markets.

Of the developed markets, the Euro-zone is preferred above Japan. None of the fund managers expect the US to outperform in the next 12 months.